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June
16, 1999
GSP Subcommittee
Office of the U.S. Trade
Representative
600 17th Street NW, Room
518
Washington, DC 20508
Re: Request for Review of the Intellectual Property Rights Practices of Uzbekistan in the 1999 Annual GSP Country Eligibility Practices Review, 64 Fed. Reg. 20046 (April 23, 1999)
To the Subcommittee:
On April 23, 1999, the Trade Policy Staff Committee (TPSC) of the
Office of the United States Trade Representative (USTR) published in the
Federal Register a notice announcing the 1999 Annual Generalized System of
Preferences (GSP) Product and Country Eligibility Practices Review. USTR
indicated that interested parties "may submit petitions to have the
GSP status of any eligible beneficiary developing country reviewed with
respect to any of the designation criteria listed in subsections 502(b) or
502(c) of the 1974 Act (19 U.S.C. 2462(b) and (c))." See 64
Fed. Reg. 20047.
The International Intellectual Property Alliance (IIPA) hereby
submits its request that the eligibility of Uzbekistan as a GSP
beneficiary developing country be reviewed, and that its GSP benefits be
suspended or withdrawn, in whole or in part, if requisite improvements are
not made by Uzbekistan to remedy the deficiencies (outlined below) which
adversely affect U.S. copyright owners. In 1998, Uzbekistan exported goods
valued at $2.26 million to the U.S. which received preferential duty-free
treatment under the GSP Program. This represents approximately 68.2% of
its total imports to the U.S., according to U.S. government statistics.
Last year, Congress reauthorized the GSP program through June 30, 1999.
Currently there are several bills pending before Congress which would
extend the GSP program.
Petitioner and its
Interest: The International Intellectual Property Alliance
IIPA is a coalition of seven trade associations that collectively
represent the U.S. copyright-based industries -- the motion picture, music
and recording, business and entertainment software, and book publishing
industries. IIPA’s member associations are the Association of American
Publishers (AAP), AFMA (formerly the American Film Marketing Association),
the Business Software Alliance (BSA), the Interactive Digital Software
Association (IDSA), the Motion Picture Association of America (MPAA), the
National Music Publishers’ Association (NMPA) and the Recording Industry
Association of America (RIAA).
These member associations represent over 1,350 U.S. companies
producing and distributing works protected by copyright laws throughout
the world -- all types of computer software including business software
and entertainment software (such as videogame CDs and cartridges, personal
computer CDs and multimedia products); motion pictures, television
programs, home videocassettes and DVDs; music, records, CDs and
audiocassettes; and textbooks, tradebooks, reference and professional
publications and journals (in both electronic and print media).
These U.S.
copyright-based industries represent the leading edge of the world's high
technology, entertainment and publishing industries. According to the most
recent edition of the report, Copyright Industries in the U.S. Economy:
The 1998 Report, prepared for IIPA by Economists, Inc., these core
copyright industries accounted for $278.4 billion in value added to the
U.S. economy, or approximately 3.65% of the Gross Domestic Product (GDP)
in 1996 (the last year for which complete data is available). The total
copyright industries accounted in 1996 for $433.9 billion in value added,
or approximately 5.68% of GDP. The core copyright industries’ share of
the GDP grew more than twice as fast as the remainder of the U.S. economy
between 1977 and 1996 (5.5% vs. 2.6%). Employment in the core copyright
industries grew at close to three times the employment growth in the
economy as a whole between 1977 and 1996 (4.0% vs. 1.6%). More than 6.5
million workers were employed by the total copyright industries, about
5.15% of the total U.S. work force, in 1996. The core copyright industries
accounted for an estimated $60.15 billion in foreign sales and exports in
1996, a 13% gain over the $53.25 billion generated in 1995. This report
has been made widely available to officials working on country and IPR
issues at USTR, and throughout other agencies, including the State
Department, the Commerce Department, the U.S. Patent and Trademark Office,
and the U.S. Copyright Office. A summary of this report is available on
IIPA’s website, at http://www.iipa.com/html/pr_05071998.html.
The U.S. creative industries represent one of the few sectors of
the U.S. economy that regularly contributes to a positive balance of
trade. It is essential to the continued growth and future competitiveness
of these industries that our trading partners provide free and open
markets and high levels of protection to the copyrights on which this
trade depends. Inexpensive and accessible reproduction technologies make
it possible for U.S. copyrighted works to be pirated -- stolen -- in other
countries, and including specifically for the purposes of this petition,
Uzbekistan. However, the copyright industries represented in IIPA lose an
estimated $20-22 billion annually due to piracy outside the United States.
These staggering losses, if not halted, could reverse this path of growth
in these sectors, threaten the high wage employment that these industries
bring to the U.S. economy, and damage U.S. competitiveness. In addition to
the worldwide problem of piracy, several foreign countries have erected
market access barriers to U.S. copyright products. To combat these dual
problems in developing countries, the U.S. copyright-based industries
joined with the Administration and Congress to fashion new legislation and
negotiating tools. IIPA and its members have supported various trade tools
with IPR provisions over the years, including the GSP Program, Special
301, Section 301, the Caribbean Basin Economic Recovery Act, and the
Andean Trade Preferences Act.
Action Requested
by Petitioner
Pursuant to Section 501 et seq. of the Trade Act of 1974, as
amended, 19 U.S.C. 2461 et seq., and 15 C.F.R. Part 2007, and pursuant
specifically to Section 502(c)(5) of the Trade Act (19 U.S.C. 2462(c)(5)),
and 15 C.F.R. 2007.0(b), IIPA, on behalf of its seven trade association
members, hereby petitions the President to review the eligibility of
Uzbekistan as a GSP beneficiary developing country, and if requisite
improvements are not made by Uzbekistan, then IIPA requests the President
to suspend or withdraw GSP benefits of Uzbekistan, in whole or in part,
for its failure to provide adequate and effective copyright protection for
U.S. copyright owners.
Legal Authority
for this Petition and Discussion of the IPR Criteria in the GSP Statute
Provisions tying intellectual property protection to trade benefits
were first added to the Trade and Tariff Act of 1984 [hereinafter "TTA
1984"]. Title V of the TTA 1984, known as the GSP Renewal Act of
1984, renewed the GSP Program which had been introduced in the Trade Act
of 1974 [hereinafter "TA 1974"], and specifically required the
President to consider intellectual property protection in determining
whether to designate a developing country as eligible for GSP benefits.
The GSP Program provides unilateral, non-reciprocal duty-free tariff
treatment to over 4,400 articles imported from more than 140 countries and
territories designated beneficiary countries and territories (these are
less developing countries) to aid their economic development through
preferential market access. An additional 1,700 articles are eligible for
GSP treatment for specified least developing countries. While there has
been a minor change in the statutory language between the GSP Renewal Act
of 1984 and the GSP Renewal Act of 1996, the Act remains essentially the
same as in 1984. The legislative history of the 1984 Renewal Act is
particularly instructive on the important link between GSP benefits and
strong IPR protection.
The GSP Renewal Act of 1984
In the GSP Renewal Act of 1984, Congress specified conditions that
GSP beneficiary countries must meet in order to gain and maintain their
preferential trading status. In particular, one of these express
conditions (which Congress also delineated as one "purpose" of
the GSP Program) was to encourage developing countries "to provide
effective means under which foreign nationals may secure, exercise, and
enforce exclusive intellectual property rights."
The legislation required the President to apply mandatory and
discretionary criteria with respect to IPR protection as a condition to a
country achieving "beneficiary" status under the GSP Program.
The mandatory criterion prohibited the designation of a country from
becoming a "beneficiary developing country" if, for example,
"such country has nationalized, expropriated, or otherwise seized
ownership or control of property, including patents, trademarks, or
copyrights, owned by a United States citizen or by a corporation,
partnership, or association which is 50 percent or more beneficially owned
by United States citizens." See Section 503(b)(4) of the GSP
Renewal Act of 1984, now codified at 19 U.S.C. 2462(b)(2)(D).
The GSP Renewal Act of 1984 added as a discretionary criterion, in
determining whether to designate a developing country as eligible to
receive GSP duty-free trade treatment, that
the President shall take into account ... the extent to which
[each] country is providing adequate and effective means under its laws
for foreign nations to secure, to exercise, and to enforce exclusive
rights in intellectual property, including patents, trademarks, and
copyrights.
Section 503(c)(5) of the
GSP Renewal Act of 1984, codified at 19 U.S.C. 2462(c)(5). The
Senate Finance Committee Report explained that:
To determine whether a country provides "adequate and
effective means," the President should consider the extent of
statutory protection for intellectual property (including the scope and
duration of such protection), the remedies available to aggrieved parties,
the willingness and ability of the government to enforce intellectual
property rights on behalf of foreign nationals, the ability of foreign
nationals effectively to enforce their intellectual property rights on
their own behalf and whether the country’s system of law imposes
formalities or similar requirements that, in practice, are an obstacle to
meaningful protection.
S. Rep. No.98-485, 98th
Cong., 2d Sess. At 11 (1984). The Senate Report also noted:
In delegating this discretionary authority to the President, it is
the intent of the Committee that the President will vigorously exercise
the authority to withdraw, to suspend or to limit GSP eligibility for
non-complying countries ....
Where valid and reasonable complaints are raised by U.S. firms
concerning a beneficiary country’s market access policy or protection of
intellectual property rights, for example, it is expected that such
interests will be given prominent attention by the President in deciding
whether to modify duty-free treatment for that country.
Id. at 12-13 (emphasis added). The House Ways and Means
Committee stated that "countries wishing to reap the benefits of
preferential duty-free access to the U.S. market must fulfill
international responsibilities" in the intellectual property area.
House Rep. No. 98-1090, 98th Cong., 2d Sess. at 12 (1984).
The IPR criteria are a condition, not only for obtaining GSP
benefits in the first place, but also for retaining them. The 1984 Act
authorized the President to "withdraw, suspend, or limit the
application of the duty-free treatment accorded under Section 501 of this
title with respect to any article or any country" and requires
the President, when taking any such action, to "consider the factors
set forth in Sections 501 and 502(c)." TTA 1984 Section 505(a)(1); TA
1974 Section 504(a)(1), as amended; 19 U.S.C. 2464(a)(1) (emphasis added).
The Act also created a system of "general reviews" to ensure
that these statutory criteria are met. TTA 1984 Section 505(b); TA 1974
Section 504(c)(2)(A), as amended; 19 U.S.C. 2464(c)(2)(A); see also
15 C.F.R. 2007.3.
This GSP Subcommittee is asked to follow the explicit intent of
Congress, and advise the President to "vigorously exercise" his
authority to withdraw, suspend or limit GSP eligibility of Uzbekistan for
its non-compliance with the statutory criterion on IPR in the GSP Program.
Over the years, retaining GSP benefits has figured prominently in
the decisions of a number of countries to improve their IPR protection. In
the 1980s, such leverage was used to encourage Singapore, Indonesia and
Malaysia to adopt new copyright legislation. IIPA has filed petitions
against several countries for their failure to provide adequate and
effective copyright protection. IIPA petitions which have been accepted by
USTR over the past ten years (1989-1998) include: Indonesia, Thailand,
Cyprus, Egypt, El Salvador, Turkey and Poland. IIPA has participated in
GSP IPR reviews involving Malta, Guatemala, the Dominican Republic,
Honduras, Panama, and Paraguay (all of which were initiated by other
petitioners or by USTR). IIPA also filed petitions in 1995 against the
Russian Federation, the Philippines, Bolivia and Peru which, we learned in
October 1996, were not accepted by USTR for the 1995 GSP Annual Review. A
GSP petition which IIPA filed against Turkey in June 1993 remains under
investigation.
The GSP Renewal Act of 1996
When the GSP Program was reauthorized in August 1996, the language
of the IPR discretionary criterion for GSP eligibility in Section
502(c)(5) was simplified slightly and now requires the President to
"take into account the extent to which such country is providing
adequate and effective protection of intellectual property rights."
The expired law specified (as discussed above) that each beneficiary
country provide "adequate and effective means under its laws for
foreign nationals to secure, to exercise and to enforce exclusive rights
in intellectual property, including patents, trademarks, and
copyrights." Otherwise, the GSP Renewal Act contains identical IPR
provisions, including "mandatory" criteria denying GSP status to
countries that directly or indirectly expropriate U.S. property (including
intellectual property), and authorizing the President to withdraw, suspend
or limit GSP privileges based on failure to meet the IPR criteria.
Uzbekistan fails
to provide "adequate and effective protection" of United States
copyrights. It also is in violation of its bilateral treaty obligations
with the United States to provide adequate and effective protection and
enforcement.
This information on Uzbekistan has been previously presented to
members of various U.S. government interagency groups, including the
Special 301 interagency group, several members of the GSP Subcommittee, as
well as the Trade Policy Staff Committee, in the context of USTR’s
Annual Special 301 review. On February 16, 1999, IIPA filed its annual
Special 301 submission to Assistant USTR for Services, Investment and
Intellectual Property Joseph Papovich; this submission was widely
distributed among the interagency for its internal consideration in the
1999 Special 301 Annual Review. IIPA’s entire report is available on our
website, http://www.iipa.com.
A description of the deficiencies in Uzbekistan's copyright legal and
enforcement regime appears in Appendix 1, which outlines the
practices violating trade agreements between the United States and the
countries of the Confederation of Independent States (C.I.S.).
In sum, the U.S. should suspend Uzbekistan's GSP eligibility or
withdraw GSP benefits (in whole or part) because Uzbekistan fails to
provide adequate and effective copyright protection and is in violation of
its bilateral treaty obligations with the United States. It has not
provided the legal framework it obligated itself to provide in 1994, nor
has it established an effective enforcement regime. The C.I.S. is becoming
a hub for an increasing number of pirate producers of CD (and CD-ROM)
musical recordings, as well as business and entertainment software;
production of musical cassettes is also a major problem. These illegal
manufacturers are swamping the entire region with illegal product,
completely disrupting markets in Central and Eastern Europe, and elsewhere
in the Confederation of Independent States (C.I.S.). Since pirates move
across borders into environments with the least adequate legal and
enforcement regimes, this absence of "adequate and effective
protection and enforcement" (as required under Article VIII of
bilateral agreement) in Uzbekistan is causing harm to the copyright
industries.
In November 1993, Uzbekistan and the United States signed a
bilateral trade agreement. This agreement entered into force on January
13, 1994 (see Article VIII of the bilateral agreement for the IPR
obligations, as well as the separate IPR Side Letter). The failure to
comply with the obligations of the bilateral trade agreement has become of
increasing concern to the copyright industries as they consider
investments and distribution of copyrighted products in the C.I.S. (all of
the former republics of the Soviet Union). All twelve of these countries
entered into bilateral trade agreements with the U.S. in exchange for
receiving MFN (now known as Normal Trade Relations or "NTR")
treatment. These identical agreements contain provisions obligating each
country to meet certain IPR obligations as a quid pro quo for MFN (NTR)
treatment. Many years after the treaty went into force, Uzbekistan has not
enacted adequate copyright laws, nor met its enforcement obligations thus
failing to meet its obligations in the copyright (and other IP) areas as
required by the bilateral agreement. These failures are long past the
deadlines set in the agreement to take such action.
The background of the
U.S.-Uzbek 1994 agreement is as follows: in 1990, the U.S. and the Soviet
Union signed a far reaching bilateral trade agreement including extensive
intellectual property rights obligations. These obligations included the
enactment and enforcement of a modern copyright regime, as measured by the
standards pertaining prior to the TRIPS Agreement. As a result of the
tumultuous events of August 1991, the 1990 U.S.-U.S.S.R. Trade Agreement,
which required the U.S.S.R. to adopt a Berne-compatible copyright law by
December 31, 1992, never entered into force because the USSR did not
implement it before it dissolved. The U.S. government determined that each
country of the C.I.S. could re-sign the 1990 U.S.-U.S.S.R. Trade Agreement
with only minor technical amendments, including new deadlines to meet the
Agreement’s obligations, and a statement from each country of the C.I.S.
acknowledging its succession to the Soviet Union’s Universal Copyright
Convention obligation, dating from May 27, 1973.
All twelve of the former republics of the Soviet Union did sign
these agreements. Once each agreement was signed, it was agreed it would
enter into force upon an exchange of diplomatic notes between the U.S. and
each new country. All twelve countries, including Uzbekistan, have now put
the agreements into force. At such time each country would be eligible for
"most favored nation" (now "Normal Trade Relations")
status. Once in force, each country (other than the Russian Federation),
agreed to make its "best efforts" to enact all of the IPR
components of the Trade Agreement by December 31, 1993 (even though the
agreement was not put into force until 1994). (The Russian Federation
agreed to complete its obligations by December 31, 1992.)
The obligations of the Uzbek bilateral trade agreement (Article
VIII of the Agreement and in the accompanying Side Letter on IPR) include:
(1) joining the Berne Convention (Paris Act); (2) providing
protection for sound recordings, including a right of reproduction,
distribution (and importation), and a commercial rental right; (3)
providing a point of attachment for foreign (U.S.) sound recordings and
making best efforts to join the Geneva Phonograms Convention; (4)
providing full retroactivity (per Article 18 of Berne); (5) protecting
computer programs and databases (as "literary works" consistent
with Berne, and now TRIPS); (6) providing adequate and effective
protection and enforcement (which is understood to include deterrent civil
and criminal penalties, as well as border measures); and, (7) establishing
a working group with each country to monitor the continuing progress of
copyright and other IP protection and enforcement.
Uzbekistan is not a member of the Berne Convention. In addition,
Uzbekistan is not providing any of the required protection and rights to
U.S. or any other sound recordings, nor is Uzbekistan a member of the
Geneva Phonograms Convention — two obligations of the trade agreement.
So, U.S. sound recordings are completely unprotected, more than five years
after the bilateral trade agreement required such protection.
Uzbekistan does not clearly provide retroactive protection
for works or sound recordings as required by the clear obligation in its
bilateral trade agreement, as well as by Berne (Article 18), national
treatment obligations, and the TRIPS Agreement (Article 14.6 for sound
recordings and Article 9 for works). Uzbekistan must clearly provide
retroactive protection for works and sound recordings to meet its
obligations.
Uzbekistan is providing legal protection in the statute, though no
actual on-the-ground enforcement, for computer programs and databases as
required under the bilateral trade agreement.
Uzbekistan has not amended its Criminal Code, following passage of
its new copyright law, to adopt criminal provisions for IPR violations, in
breach of the bilateral agreement. In addition, Uzbekistan is not
providing "adequate and effective" enforcement with any
meaningful police or prosecutorial activity, as required by the bilateral
trade agreement, even if some (albeit weak) civil and administrative
provisions do exist. Also, border enforcement is very weak in Uzbekistan,
allowing illegal copies that are produced in any country in the region
(like Ukraine and Belarus) to freely cross borders for sale in others.
The failure to provide an adequate legal and enforcement regime in
Uzbekistan is causing significant harm to the copyright industries. The
environment is ripe for illegal optical media production facilities as
well as other organized criminal production facilities. The Business
Software Alliance (BSA) estimates that trade losses due to software piracy
in all of the C.I.S. other than Russia was $34.1 million in 1998, and that
the level of piracy is 93%. Attached as Appendix
2 is the methodology used by IIPA members to calculate losses due
to piracy. This methodology was also submitted to the USTR in IIPA’s
1999 Special 301 submission.
CONCLUSION
For the reasons stated in this submission (including the
Appendices), IIPA requests that the TPSC initiate a review the country
eligibility of Uzbekistan for its failure to provide adequate and
effective copyright protection and enforcement for U.S. copyright owners.
If requisite improvements are not made in Uzbekistan to remedy these
deficiencies, then IIPA requests that the U.S. suspend its eligibility or
withdraw GSP benefits of Uzbekistan, in whole or in part.
Respectfully submitted,
Eric H. Smith
President
International Intellectual Property Alliance